News, Notes and Comments on New Projects, Trends and Construction In the Commercial Real Estate Development and Planning Pipeline Around the U.S
Report: Much of Nation's Aging Office Stock Is Unsuitable For Tenants Coping With New Workplace Economics
Office landlords in the nation’s largest cities own some of the world's most valuable real estate, but the age and relative inefficiency of a majority of those properties present big challenges for owners as U.S. businesses re-engineer and often downsize their space requirements to meet leaner 21st-century workplace needs.
"There is a coming crisis in these leading CBDs: the changing occupier requirements can no longer be adequately supported by the majority of the current inventory," Cushman & Wakefield Managing Director Rick Cleveland says in a new report, "Supply Side Risk in the New Age of Work."
A review of existing Class A office inventory in the CBDs of Boston, New York, Washington, D.C.; Chicago, Los Angeles and San Francisco found that more than half, 53%, of the buildings were constructed prior to 1980. Even those buildings renovated since their initial construction date are often unlikely to be able to handle the strain that modern work environments and higher employee densities place on a building’s infrastructure.
Since the economic recovery began, corporate real estate departments have had ample time to re-assess their space needs. Companies are shrinking their per-employee square foot requirements while demanding more collaborative space and flexible floor plates, and many are prepared to sacrifice the holy grail of real estate, their location in the CBD, for space in an evolving "outer ring" submarket that better suits their needs.
"Reducing and controlling cost through higher density is not only a trend that is here to stay, but is arguably the one factor that will have the most impact on the physical asset," Cleveland said.
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According to a recent CoreNet Global survey of corporate real estate executives, more than three-quarters of respondents project that the average will drop from the 2010 average of about 225 square feet to 150 square feet or less by 2018. More than 53% predicted the average will be 100 square feet or less.
An older 500,000-square-foot tower built to accommodate 225 square feet per worker or higher is designed to have 2,200 workers coming and going each day at full occupancy. As many as 5,000 people could enter and exit the same building at densities of 100 square feet per worker.
Such a 125% increase in daily traffic could cause considerable congestion in the lobby, elevators and parking structures as workers coming in and out of a building - not to mention the stress on the mechanical, engineering, electric, plumbing and technology support systems.
KP Development, a build-to-suit developer and project manager for investment grade single-tenant properties specializing in office, industrial and retail projects, has reportedly been interested in the site for more than three years.
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TIAA-CREF, Transwestern Begin Construction of Houston Office Tower
TIAA-CREF and Transwestern broke ground on BHP Billiton Tower, a 600,000- square- foot office building on the Four Oaks Place in Houston's Galleria submarket.
The 30-story is being built on a 2.72-acre tract at 1500 Post Oak Blvd. is 100% preleased to BHP Billiton, a global energy and resources firm.
The development site is adjacent to the BHP Billiton headquarters building within the four-building, 1.7 million-square-foot Four Oaks Place office complex. BHP Billiton occupies all of 1360 Post Oak Boulevard, with additional space within Four Oaks.
Delivery is expected in October 2016. After the new tower is erected, Four Oaks Place will total about 2.3 million square feet.
TIAA-CREF is the owner of the property while Sean Suffel, Jim Teare and Steve Kilcrease of Transwestern will handle the development of this project.(By Aderonmu Zainab)
Ramco-Gershenson Begins Lakeland Park Development
Ramco-Gershenson Properties Trust (NYSE:RPT
) announced it has started development of the Lakeland Park shopping center next to its existing Shoppes of Lakeland project in Lakeland, FL.
The Farmington Hills, MI-based shopping center owner and operator will develop Lakeland Park in two phases, the first consisting of about 210,000 square feet of retail space
The phase is 96% leased, anchored by a roster of tenants that includes Dick's Sporting Goods, Ross Dress for Less, PetSmart, Old Navy, ULTA Beauty, Shoe Carnival, Floor and Décor, Dress Barn, Lane Bryant, and America's Best.
The $33.6 million first phase of construction will begin this fall, with a projected opening date of November 2014.
Lakeland Park was incubated due to significant tenant interest in the market that the shopping REIT could not accommodate in its Shoppes of Lakeland, and the strong pre-leasing speaks to the desirability of the development's strong location, said Dennis Gershenson, president and CEO.
As of mid-year, Ramco-Gershenson owned and managed a portfolio of 79 shopping centers and one office building with about 15.2 million square feet of gross leasable area owned by the company or its joint ventures Michigan, Florida, Ohio, Georgia, Missouri, Colorado, Wisconsin, Illinois, Indiana, New Jersey, Virginia, Maryland, and Tennessee.
Westcore Acquires Former Chronicle Printing Site
Westcore Properties acquired the 16.5-acre site of the former San Francisco Chronicle printing facility at 1550 Pacific St. in Union City, CA.
Terms of the sale by Hearst Communications, Inc. were not disclosed. The 163,000-square-foot former printing plant will be demolished to make way for a 300,000-square-foot manufacturing and distribution facility catering to food production and distribution, according to Colliers International, which represented Westcore.
With businesses expanding and the Union City market tightening considerably, speculative development has become commercially viable, said Kevin Hatcher, vice president, Colliers International in Oakland, calling the development "a generational opportunity for opportunistic users to upgrade functionally obsolete facilities to Class A facilities."
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Trammell Crow Buys West Hollywood Mixed-Use Apt. Site
A joint venture led by Trammell Crow Residential (TCR) has purchased a 1.33-acre site at 7141 Santa Monica Blvd. and will break ground a development with 166 luxury apartments and 9,300 square feet of stores and eateries on the ground floor.
The buyer of the site slated for the project called Domain West Hollywood was a joint venture of Trammell Crow Residential (TCR) and Cornerstone Real Estate Advisers, on behalf of an institutional client. Fifth Third Bank is the construction lender.
Timothy Barden of Land Advisors represented the seller, Walbern Development. With approvals in place, TCR expects to begin demolition of the sound studio and industrial facility on the property this fall and begin construction of Domain WeHo next spring.
The first move-ins are projected to begin in spring 2016.
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Second Building at Noble Energy Center Breaks Ground
Trammell Crow Co. and Principal Real Estate Investors have started work on Noble Energy Center Two, a 20-story, 470,000-square-foot office building on 4.7 acres next to the just-renovated first Noble Energy Center tower.
Now completed and delivered is a major renovation of the 10-story Noble Energy Center One, a 497,000-square-foot office building at 1001 Noble Energy Way in Houston’s Northwest office submarket.
Both buildings are global headquarters for Noble Energy, a leading independent energy and global oil and gas exploration and production company.
Noble Energy Center One completed a renovation that started in January 2012, including modifications to lobbies, elevators, landscaping, common areas, signage and other aspects of the building and parking garage. The project has also obtained LEED Gold certification from the U.S. Green Building Council.
Noble Energy Center Two will feature an integrated eight-story parking garage, a 'town hall' to serve corporate meetings, and an elevated sky bridge connecting to the existing tower. The building is pre-certified LEED Gold and the ownership is seeking Energy Star certification. Noble Energy Center Two is scheduled to be complete by mid-2015.
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